This is not merely a maxim for the world of investment. As a
matter of arithmetic, it is the only, possible way to make a profit, in any
market, over the long term. Yet what do we see, in the (supposedly)
sophisticated world of the Western investor? We see real
estate prices at insane (bubble) highs, yet Western “investors” continue to funnel insane quantities of
their financial resources into the most over-priced real estate, in history.

At the opposite extreme; precious metals prices are currently
at an extreme/insane low, generally below the cost
of production, for gold in particular. This guarantees declines in future
production, even as these markets already have widening supply deficits. Yet
the Western investor flocks into real estate, but shuns precious metals.

Buy high; sell
higher(?).

This is not merely the maxim of idiots, as a matter of
arithmetic, it mathematically guarantees that one will lose money in markets,
over the long term. It is financial suicide. Yet this is the pattern we see
with nearly all (supposed) “investment” today: buy stocks (which are at
bubble-highs), buy bonds (which are at even more-absurd bubble-highs), buy real
estate (also at bubble-highs) – and hope
to be able to sell these bubble-investments at even higher (i.e. more
ridiculous) prices.

How do we explain the lemming-like behavior of the Western
investor? In one word: conditioning (or “brainwashing”, for those who prefer
more direct speech). We have been conditioned, for decades, into becoming
momentum-chasing Lemmings, while (equally) we are conditioned away from any
activity which remotely resembles the concept of “investing”

‘Buy and hold is
dead.’

You could hear that phrase come out of the lips of a
million-and-one charlatan financial analysts, following the Crash of ’08. Why?
Because all of these “experts” (and their clients) had been badly burned, and
completely “surprised” – by that utterly predictable event.

What was the solution of (most of) the “investment
community” to their mass, systemic failure in 2008? Did they try to (honestly)
ascertain how so many of them could have been so very, very wrong? Of course
not. They simply threw up their hands, en masse, and publicly/officially
proclaimed that they were ceasing even attempting to “invest” in markets.

Buy-and-hold is dead.

Buy-and-hold is
“investing”. The definition of the verb “to invest” is to place one’s wealth
into a particular asset class, and then give that asset (i.e. investment) time to mature. If one
buys-but-doesn’t-hold, then (by definition) that person is no longer
“investing” at all – merely gambling.

Thus we see that the individuals (Lemmings) referred to as
“Western investors” are, in fact, merely all serial gamblers. Why is
serial-gambling considered to be (and treated as) a “disease”? Because serial gamblers
almost always end up in financial ruin.

In the case of Western gamblers, who have been deluded into
believing that their gambling is
actually “investing”, this path-to-ruin can be very easily described and
defined. They are attempting to buy-high and sell-higher. But what always
happens to such market gamblers, over the long term is that “buy high; sell
higher” inevitably turns into “buy high; sell low” – after the bubble(s) bursts.

How do we know the supposed “investors” in Western markets
are now pure gamblers? It is easily proven just by looking at how the markets
are presented. Almost always, they are presented via charts. And (almost exclusively) the “investments” being touted by
charlatan pseudo-experts are charts with a strong, upward slope.

Look how high the
price has already gone. Look how much higher
we expect the price to go.

Only gamblers think in this manner, and look at the world in
this manner. Here readers need to understand that “price” is not a fundamental
of any market. In legitimate markets
(and only legitimate markets); price can be used as a proxy (for some
fundamentals), and thus price-analysis can have some degree of validity. But those
readers who believe we have “legitimate
markets” would probably be more interested in reading fairy-tales about the
Easter Bunny than in continuing to read this analysis.

In non-legitimate markets; price-analysis
has zero validity. Period. All of
this silly chart-watching and chart-predicting has no analytical validity,
whatsoever. It is nothing more than bait
for gamblers.

How do real investors behave? Real investors spend their
“due diligence” time not with meaningless price-analysis (and momentum-chasing
charts), but rather by looking at something called “fundamentals”. Supply. Demand. And other words rarely heard in the momentum-chasing world
of the charlatan gamblers.

Why do real investors ‘waste’ their time in such activity,
rather than price-watching so that they can hear which “hot investment” is
going to go even higher? Real investors look at fundamentals because they are not looking for the most-expensive asset
classes in which to place their wealth. Rather, they are looking for the
“cheapest” asset classes.

Buy low; sell high. To make money, over the long term (and
engage in real “investing”); one must always start by “buying low”. Let us now
return to a comparison of precious metals versus real estate.

Real estate prices are not merely high. They are not merely
“too high”. They are very obviously bubble
high. There is perhaps no asset-bubble which is easier to see than a real
estate bubble. The reason for this is very simple. There is, always has been,
and always will be a strong correlation (over the long term) between real estate prices and income levels.

Put more precisely, and put into even more-basic terms; over
the long term real estate prices must match income levels. How do we finance
the purchase of our homes? Via our incomes. Thus obviously if house prices soar
high above income-levels then those house prices must (at some point) come
tumbling down, because the financing of that real estate bubble cannot be sustained.

According to nearly all of the “experts”; the crash of the
U.S. housing market was a “surprise”. Really? What “experts” were incapable of
understanding the significance of the chart above? Apparently nearly all of
them.

Here is a glimpse (above) of the housing bubble in the
market in which this writer is domiciled, back
in 2009. The “bubble” in Vancouver’s real estate market six years ago could
not be more obvious. What has happened since then? The bubble-prices have
soared roughly 40% higher, while incomes remain (roughly) flat.

Obviously no one who has purchased a residence in the
Greater Vancouver area since 2009 can even pretend to be “investing”. This is
pure gambling. Buying (ridiculously) high; hoping
to sell even (more-ridiculously) higher. Momentum-chasing insanity. And we
could construct similar charts around much/most of the Western world. Cultural insanity.

Then we have precious
metals. There isn’t enough space in the remainder of this commentary to
even begin to adequately summarize the full, fundamental virtues of this asset
class. But such a level of detail is unnecessary in this analysis, where gold
and silver are being stacked-up against obvious, absurd bubbles.

There are a dozen different means of demonstrating, in
fundamental terms, how/why gold and silver are objectively cheap, as asset
classes, but we only need one. One such previous
analysis showed that gold is now clearly priced below the average cost of production, in a sector with a large,
ongoing supply deficit. As a matter of “fundamentals” (economics, logic, and
arithmetic); the only, possible direction for the price of gold to go over the
long term is up. That is investing.

We look at the silver market, and we see based on the
historic metric of the “average wage” that a fair-market
price for silver, today, would be
$1,000/oz. Yet we see silver priced
at roughly $15/oz (USD). We look at the difference between $1,000 and $15, and
we see opportunity. That is
investing.

It is impossible to look at any real estate market in the
Western world and engage in similar, fundamentals-based analysis. By any
possible (rational) metric, Western real estate is priced at utterly insane
levels. As noted in a previous
series on this subject; these bubbles have been deliberately created (by the banking
crime syndicate) as a prelude to most massive “crash” (and foreclosure
“operation”) even seen in the Western world – or anywhere.

Buy low; sell high.

Western real estate is obviously priced sky-high. The
Rational Investor would (only) be a seller of real estate today. Precious
metals, meanwhile, are priced at a rock-bottom low. The Rational Investor would
(only) be a buyer of gold and silver.

What does one say to those who (smugly) proclaim “look how
much money I’ve made already in real
estate”? We have a joke which deals with people like this.

A man jumps off the roof of a
100-storey building. As he plummets past an open window on the 50th
floor, someone sitting near the window hears him say “so far, so good…”

Back when people made rational decisions in the marketplace
concerning their financial management; why did people consciously choose to
“invest” rather than “gamble”? Two reasons.

We invest rather than gamble, because (over the long term)
our probability of success is much greater (“buy and hold”). We also invest
rather than gamble, because “investing” makes it much easier to sleep soundly
at night.

This should be no surprise to the “investor” of today. Those
putting their wealth into ultra-expensive real estate, hoping that the bubble-prices will go higher (before they crash)
are either not sleeping well, or simply living in a Fool’s Paradise. Those
putting their wealth into gold
and silver; knowing these assets will “appreciate” (in relative terms) over
time are undoubtedly sleeping much more soundly.

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